Photon Control Signs Letter of Intent to Resolve Litigation

Proposed settlement would remove significant uncertainty and distraction for Photon Control and its customers.

Photon Control would acquire undisputed ownership of intellectual property and internalize R&D activities.

Settlement would more than halve existing royalty rates and term of the disputed agreements.

BURNABY, BC, March 20, 2017 /CNW/ - Photon Control Inc. ("Photon Control" or the "Company") (TSX-V: PHO), a leading developer of optical measurement technologies, announces that it has signed a Letter of Intent which lays out the terms of a proposed settlement (the "Settlement") to resolve all legal actions commenced by the Company against Photon Control R&D Ltd. and certain others (collectively "R&D"), as well as the counter-claims filed by R&D against the Company.

The litigation primarily involved the question of ownership of certain intellectual property, the rates and terms of certain royalty agreements, control of the Company's research and development and other matters involving a historical relationship between the Company and R&D. The Settlement will enable Photon Control to focus its resources on serving the needs of its customers and it avoids an expensive and time consuming trial currently scheduled to be held in 2018. Most importantly, it provides stability for the Company's customers and it adds a cohort of deeply talented industry experts to the Company's research and development team.

All legal actions currently underway between the Company and R&D will be suspended pending preparation and execution of binding agreements which is targeted for the end of March with closing to occur by mid-April. The binding agreements remain subject to approval by the board of directors of the Company (the "Board") and the principals of R&D.

Principal terms of the Settlement are as follows:

a.

The Company will acquire full ownership of all Intellectual Property, products, trademarks and other assets previously under dispute.

b.

R&D employees will be transferred to and hired by Photon Control.

c.

The Company will pay a percentage of sales revenue to the current owners of R&D commencing January 1, 2017 for a period of 5 years, equal to 4.25% of revenues from sales of products currently under license from R&D pursuant to existing agreements and such additional products created by the Company based on designs in development by R&D up to December 31, 2016. . This reduces the royalty rate in the existing, disputed agreements by more than 50% (currently a sliding scale of 25% to 10%) and decreases the term of the disputed agreements by 5 years.

d.

The Company will pay R&D in cash for all past due royalty amounts to December 31, 2016 and outstanding payables, the entire quantum of which has been fully accrued by the Company in its accounts.

e.

R&D has agreed to non-competition arrangements with the Company.

D. Neil McDonnell, Board Chair, who had been tasked with seeking a negotiated settlement with R&D, stated: "We would like to acknowledge and thank Chris Weston, Michael Weston and David Dueck for their longstanding efforts in building Photon Control into the great company it has become, and their cooperation during this period in negotiating this Settlement which resolves all disputes and removes any uncertainty over the Company's ownership of its Intellectual Property and Products. In addition, we are very pleased to welcome R&D employees into the Company as we strongly believe that they are integral to the future development of the Company and to meeting our customers' current and future needs."

Forward-Looking StatementsThis News Release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Such forward-looking statements concern the business and anticipated financial performance of the Company and include, without limitation; statements with respect to various elements of the Settlement; ; and the Company's objectives, goals, liquidity, sources of capital, expectations of sales and continued development of technologies and products.

These forward-looking statements are based on certain factors and assumptions, including, without limitation; the Company's ability to successfully complete the Settlement, including execution of definitive binding agreements, the transition of R&D employees to the Company, incorporation of R&D intellectual property, continued and future demand for the Company's products; continued sales to the Company's major customers; the continued financial health of the semiconductor industry; and the Company's ability to continue and further enhance revenue diversification and open new market opportunities.

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward- looking statements, including, without limitation, the Company may be unsuccessful in settling and execution definitive binding agreements reflecting the Settlement on the terms described or at all; risks in securing the services of and integrating R&D employees into the Company; difficulties in incorporating R&D's intellectual property, legal action from third parties which may arise from theSettlement;; uncertainties relating to the market for the Company's products and maintaining a stable level of orders; fluctuations in revenue as a result of volatility in the markets and product mix; risks relating to the Company's present reliance on four major customers for the majority of its sales; risks relating to the Company's reliance on the financial health of the semiconductor industry;; risks associated with technical difficulties or delays in product introductions, improvements, implementation; uncertainties in product pricing or other initiatives of the Company and its competitors; and risks in pursuing additional development projects to support existing customers or pursue other business opportunities.

The foregoing assumptions, risks and uncertainties are not exhaustive of the items that may affect our forward-looking statements. Should underlying assumptions prove to be incorrect or one or more of these risks and uncertainties materialize, actual results may vary materially from those described in the forward- looking statements. The Company's forward-looking statements are based on beliefs, expectations and opinions of management on the date the statements are made. For the reasons set forth above, readers should not place undue reliance on forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements included herein if these beliefs, estimates and opinions or other circumstances should change, except as otherwise required by applicable law.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.